Subject

Concept Definition and Explanation

In moving average approaches different practitioners use differend days' moving averages.

50 day and 200 day moving averages (DMA) are popular.

50 DMA is used to indicate intermediate trend.

200 DMA is used to indicate major trend.

200 days moving average uses the average of past 200 days closing prices as a point to be plotted on the day of the trading at the end of the day. Thus a series of 200 DMA points is obtained. As long the current prices are above 200 DMA line, the trend is assumed to be up. When the current price line pierces the 200 DMA line from above, the trend is assumed to have reversed.

In the case of downtrend, current price line will be below 200 DMA line. When the current price line pierces the 200 DMA lines from below, the trend is assumed to have reversed.

50 DMA line is also interpreted and used similarly. But the duration of trend will be small in the case of 50 DMA compared to 200 DMA.